ORDER

Arvind Soni, Accountant Member.- This appeal has been filed by the assessee against the order dated 22.09.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the ld. CIT(A)”] for Assessment Year 2016-17 arising out of assessment order framed under section 147 read with section 144B of the Income-tax Act, 1961 (“the Act”).

2. The brief facts of the case are that the assessee filed the return of income for Assessment Year 2016-17 on 27.03.2018 declaring total income of Rs.23,41,800/-. The case was selected for limited scrutiny u/s 143(3) of the Income Tax Act 1961. Notice u/s 143(2) issued ITO-1 Harda, for limited scrutiny on 28-09-2018 on following issue (i) Cash in hand (ii) Share Capital and the assessment was completed on 27.12.2018 by accepting the return of income of the assessee filed. Thereafter notice u/s 148 issued on 31/03/2021 by ITO-Harda for the same assessment year after recording the reasons for reponing for the assessment year u/s 147 as under: –

3. Aggrieved by the impugned assessment order, the assessee preferred an appeal before the Id. CIT(A). The Id. CIT(A), vide order dated 26.08.2025, dismissed the appeal and confirmed the action of the Assessing Officer. On the basis of reasons and facts recorded by Ld. AO observation in para on page 17 of the 17 of the order.

4. Being aggrieved against the impugned orders of the ld. CIT(A) dated 26.08.2025. The assessee is now in appeal before this Tribunal and raised grounds of appeal as mentioned in the momo of appeal filed on 22.09.2025 as under:

“1.The re-opening of assessment is bad in law since original assessment was framed after considering all documents and submissions made in this regard on the same issue.

1.1 The re-opening of assessment is bad in law since there is no failure on the part of the assessee to disclose fully and truly on material facts.

1.2 The re-opening of assessment is bad in law sice the issue of the notice by the ITO is without jurisdiction. The assessment be annulled and/or cancelled.

2. The Ld. CIT(A) NFAC has erred in upholding the addition of Rs. 37,01,999/- without considering the submissions made and documents filed before him. The addition may please be deleted.

3. It was proved before the Ld. Lower authorities that the books are audited and the cash balance increased because of day to day business transaction. The addition is uncalled for and hence be deleted.

4. The addition of Rs. 37,01,999/- may please be deleted.

5. The assessee craves to amend, alter or delete any of the ground of appeal. “

5. The Id. AR submitted the paper books on 23.03.2026 which contain the page no.1 to 70 and on 06.07.2026 which contained page no.49-144. With the direction by the ITAT on the hearing date the Ld. AR also submitted on 08.09.2026. He audited balance sheet for the year ended 31.03.2015 and the partners capital account for the relevant financial years.

Ground No. 1

6. During the course of hearing, Ld. AR did not press the legal ground raised in ground no.1. However he submitted that the proceedings initiated under section 147 of the Act are not maintainable having regard to the reasons recorded by the AO and furnished to the assessee. The Ld. AR according confirmed his submission to the validity of the proceedings on the basis of the reasons recorded by the AO.

7. Ld. DR has relying upon the order passed by the lower authorities.

8. We have considered the rival submissions and perused the material available on record. The learned Authorised Representative has not pressed the legal ground raised in Ground No. 1 and has confined his submissions to the issue arising from the reasons recorded by the Assessing Officer and the addition made in the reassessment proceedings.

9. We have heard the rival submissions of the learned Authorised Representative and the learned Departmental Representative and perused the material available on record. The first issue raised by the assessee relates to the validity of reopening of the assessment under section 147 of the Income-tax Act, 1961. From the facts available on record, it is undisputed that the assessee had originally filed its return of income for Assessment Year 2016-17 declaring total income of Rs.23,41,800/-. The return was selected for limited scrutiny under section 143(3) on the issues of cash-in-hand and share capital. Notice under section 143(2) was issued on 28-09-2018 and notice under section 142(1) was also issued during the course of the original assessment proceedings. The assessment under section 143(3) was thereafter completed on 2712-2018.

10. From the assessment records, it is noticed that the Assessing Officer made an addition of Rs.37,01,999/- by referring to difference in the cash-in-hand reflected in the books of account of the assessee. The reasons recorded by the Assessing Officer refer to the opening cash balance of Rs.15,43,216/- as on 01-04-2015 and the closing cash balance of Rs.52,45,215/- as on 31-032016. The ld AR also stated that the source of cash was withdrawals from the bank the summary of cash flow statement for the year ended 31-03-2016 is submitted on page no 99 of the paper book.

11. In this regard, we find that the assessee’s books of account for the relevant financial year were duly audited. The cash balance reflected in the books was also incorporated in the audited financial statements. The assessee has further placed before us, pursuant to the direction of the Bench, the audited balance sheet for the year ended 31-03-2015 and the partners’ capital account for the relevant financial year. On examination of the material placed before us, the amount of Rs.15,43,216/-represents the opening cash balance as on 01-04-2015. The corresponding closing balance as on 31-03-2015 is carried forward as the opening balance of the subsequent financial year. Thus, the amount of Rs.15,43,216/- is not a fresh credit or receipt recorded in the books during the previous year relevant to Assessment Year 2016-17. It is a brought-forward balance from the immediately preceding financial year.

12. We further note that the Assessing Officer has not brought any material on record to demonstrate that the opening cash balance of Rs.15,43,216/- was generated or received by the assessee during the previous year relevant to Assessment Year 2016-17. Merely because the opening cash balance was not supported by a separate document during the reassessment proceedings, the same cannot, by itself, establish that the amount represented unexplained income pertaining to the relevant previous year. The Assessing Officer has also referred to the movement in the cash balance, namely, the opening balance of Rs.15,43,216/- and closing balance of Rs.52,45,215/-. However, the mere increase in the closing cash balance, without examining the individual cash receipts and payments recorded in the books and without identifying any particular unexplained receipt, does not by itself justify an addition of Rs.37,01,999/-.

13. We also find that the books of account of the assessee have not been rejected by the Assessing Officer under section 145(1) of the Income Tax Act, 1961. There is no specific finding in the assessment order that the cash book was fabricated or that any particular cash entry recorded therein was false or unverifiable. The addition has essentially been made with reference to the difference of opening and closing cash balance.

14. In these circumstances, we are of the considered view that the addition of Rs.15,43,216/- cannot be sustained merely on the ground that the assessee could not furnish further documentary evidence in respect of the opening cash balance, particularly when the said balance is shown as the brought-forward balance from the preceding financial year and is reflected in the audited accounts. The Ld DR has not brought any contrary material before us to establish that the opening cash balance of Rs.15,43,216/- did not exist as on 01-04-2015 or that the same represented income earned by the assessee during the previous year relevant to the year under consideration. Therefore, on the facts and material available on record, the addition of Rs.37,01,999/- is not justified.

15. Accordingly, the addition of Rs.37,01,999/- made by the Assessing Officer is directed to be deleted. Ground No. 2 raised by the assessee is accordingly allowed. Since the learned Authorised Representative has not pressed Ground No. 1, the same is dismissed as not pressed.

16. In the result, the appeal of assessee is partly allowed.

ORDER

Paresh M. Joshi, Judicial Member.- This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961, [herein after referred to as the Act for the sake of brevity] before this tribunal as & by way of a second Appeal. The Assessee is aggrieved by the order bearing Number :-ITBA/APL/S/250/2025-26/1076452108(1) dated 26.05.2025 passed by the Ld. CIT(A) u/s 250 of the Act which is hereinafter referred as the “Impugned Order”. The Relevant Assessment Year is 2024-25 and the corresponding Previous Period is from 01/04/2023 to 31/03/2024.

2.1 That as & by way of an Intimation Order passed u/s 143(1) of the Act, the Assessee’s claim u/s 115BAA of the Act was not considered despite the same was claimed in the Income Tax Return filed on 15.11.2024. In the Income Tax Return total Income was at Rs 13,90,80,470/- the Tax liability as provided by Tax payer was at Rs 3,52,30,284/- however the same was computed at Rs 4,89,14,776/-. Net Taxable amount was at Rs 1,15,38,490/-. That the aforesaid Intimation Order bears Demand Reference No:- 2024202437346455423C & that the same is dated 22.01.2025 which is hereinafter referred to as the “Impugned Intimation Order” for sake of brevity [Page 31 of Appeal Memo].

2.2 In the ITR total Income is at Rs 13,99,80,470/- & a refund of Rs 39,09,230/- was claimed as total Taxes paid were more than what was coming at the time of filing ROI [Page No. 7 of the Paper Book]. In the ITR [Page No. 8 of the Paper Book] option u/s 115BAA was exercised at (e) “the filing status”. ROI is dated 15.11.2024. In Form 3CD [Page No. 10 of the Paper Book] at Serial No:-8(a) the Assessee too has opted for Taxation u/s 115BAA. The form No:- 10-IC dated 28.12.2023 for claiming benefit u/s 115BAA is at Page No. 5 of the Paper Book. On Page No. 6 of the Paper Book Form 10-IC Para 6 states that “I understand that the option under subsection (5) of Section 115BAA once exercised for any Previous Year cannot be subsequently withdrawn for the same or any other Previous Year”.

2.3 That the Assessee being Aggrieved by the aforesaid “Impugned Assessment Order” prefers the first Appeal u/s 246A of the Act before the Ld CIT(A) who by the “Impugned Order” has dismissed the first appeal of the Assessee on the grounds & the reasons specified therein. The core grounds & the reasons for the dismissal of the 1^st appeal was as under: –

5. Decision

“5.1 On Grounds of Appeal Nos. 1 to 4:- Upon perusal of records, it is found that Form 10 IC was filed late on 28.12.2023 for the Assessment Year 2023-24. Section 115BAA of the Income Tax Act, 1961 offers a reduced tax rate for domestic companies subject to the conditions as per Rule 21AE (1) of the Income Tax Rules which allows a domestic company to benefit from lower tax rates by filing Form 10 IC. Form 10 IC must be submitted by the ‘due date’ for filing the company’s return for the previous year. If a company files form 10 IC after the due date, the option under Section 115BAA will be treated as not exercised. Hence, the company will not be eligible for the concessional tax rate for that assessment year. In order to opt for concessional tax regime under Section 115BAA in the subsequent year, the appellant has to exercise the option afresh in the subsequent year by filing Form 10 IC on or before the due date of filing of return of income under Section 139(1) of the Act.”

“5.2 In the present case, Form 10 IC was filed late on 28.12.2023 for the Assessment Year 2023-24 which was not as per the provisions of section 115BAA to claim concessional tax rate. In order to opt for concessional tax regime under Section 115BAA for Assessment Year 2024-25, the appellant had to exercise the option afresh in the Assessment Year 2024-25 by filing Form 10IC on or before the due date of filing of return of income under Section 139(1) which the appellant has not admittedly done. Therefore, the appellant is not eligible for concessional tax rate u/s 115BAA of the Act for the Assessment Year under consideration.”

“5.3 The appellant has placed reliance on the judgement of the Hon’ble Supreme Court in Dilip Kumar & Co. [(2018) 9 SCC] and claimed that when mandatory and directory conditions are clubbed, fulfilling the former is sufficient. Further, the appellant has relied upon CBDT Circular No. 19/2023 dated 23.10.2023, which condoned late filing of Form 10-IC in genuine cases.

The judgement of the Hon’ble Supreme Court and CBDT Circular are not applicable in the present case as no Form 10IC has been filed by the appellant for the year under reference.”

“5.4 Further, the appellant has placed reliance on the judgement of the Hon’ble ITAT in the case of JSW Minerals Trading Pvt. Ltd. In that case, the Assessment Year involved was 2020-21 which was the very first Assessment Year and due to the fault on the part of the System, the assessee had not filed the Form along with the return of income. But in the present case, the assessment year is 2024-25 and there was no fault in the system and the appellant could have filed Form 10IC for the assessment year 2024-25 before the due date of filing of return of income. Form 10 IC already filed for the assessment year 2023-24 was late and the appellant was considered as not eligible for concessional tax rate u/s 115BAA on the basis of that Form 10IC filed on 28-12-2023.” “5.5 In view of the foregoing, I am of the considered view that the assessee didn’t validly exercise the option under Section 115BAA of the Act for the assessment year 2024-25. Accordingly, the appeal is dismissed.”

“6. In the result, the appeal is dismissed.”

2.4 That the Assessee being aggrieved by the aforesaid “Impugned Order” has preferred the Instant Second Appeal before us & has raised the following grounds of Appeal in the Form No: -36 against the Impugned Order which are as under: -” 1. On the facts and in the circumstances of the case and in law, the Ld. Joint Commissioner of Income Tax (Appeals), Panchkula [‘the Ld. Jt. CIT(A)’] has erred in confirming the action of the Ld. Assessing Officer, Centralized Processing Centre, Bengaluru (‘the Ld. AO, CPC’) by not allowing the benefit of taxation u/s. 115BAA, which is against the provisions of the Act and rule made thereunder. Thus, benefit of concessional rates of taxation u/s. 115BAA of the Act may kindly be allowed to the appellant company and the Intimation u/s. 143(1) is liable to be quashed.

2. 5 On the facts and in the circumstances of the case and in law, the Ld. AO, CPC and the Ld. Jt. CIT(A) have erred in not appreciating that the appellant company had already filed Form No. 10-IC for the AY 2023-24 on 28.12.2023 and therefore there was no requirement of filing Form No. 10-IC again in AY 2024-25. The same is not in accordance with the provisions of the Act and rules made thereunder. Thus, Intimation u/s. 143(1) of the Act dated 22.01.2025 is liable to be quashed.

3. On the facts and in the circumstances of the case and in law, the Ld. AO, CPC has erred in denying benefit of concessional rate of taxation u/s. 115BAA of the Act without issuing any Notice for proposed adjustments/modification in tax rates and without assigning any reasons thereof which is against the principles of natural justice and thus, the Intimation u/s. 143(1) of the Act is liable to be quashed and the resultant demand is liable to be deleted.

The appellant company craves leave to add, alter, amend or withdraw any of the grounds of appeal.”

3.2 The hearing in the matter took place before this Tribunal on 11.08.2026 when the Ld. AR & on the behalf of the Assessee appeared before us & inter-alia contended that the “Impugned Order” is bad in law, illegal & not proper. It, therefore, deserves to be Set Aside.

3.3 The Ld AR has placed on the record of this Tribunal a Paper book containing Pages 1 to 28 and copy of in case of Reotech Process Equipment (P) Ltd v. ITO [IT Appeal No.1411 (Chny) of 2025, dated 1-9-2025].

3.4 During the course of the hearing Ld AR has brought to our attention the Facts of the case which we have already stated in the Factual Matrix as aforesaid. In brief it was repeated & reiterated that in the Impugned Assessment Order & Impugned Order the claim of the Assessee for benefit u/s 115BAA is denied despite the relevant form 10-IC dt 28.12.2023 (Paper Book page 5) mandated that option u/s (5) of 115BAA is required to be exercised once for any previous year & cannot be subsequently withdrawn for the same or any other previous year. In this regard out attention was also invited to paper book page 1 of ITR for AY 2023-24 dated 29.12.2023 & paper book page 2 of ITR AY 2023-2024 to (e) in the filing status where it was shown that even in AY 2023-204 benefit of Section 115BAA was claimed. Basis Paper Book page 4 our attention was invited to form CD of AY 2023-2024 Serial No:- 8(a) where too option u/s 115BAA was opted for. Per contra the Ld DR appearing for the Revenue stated that subsection (5) of section 115BAA contemplates filing of Form 10IC (Rule 21AE) on or before due date specified under subsection (1) of section 139 for furnishing the return of Income for any Previous Year relevant to the Assessment Year commencing on or after the 1^st day of April 2020. No declaration & (or delayed declaration leads to denial of Section 115BAA. The Assessee is in Appeal for AY 2024-2025 & Form No 10IC is on record for this AY 2024-2025. Reliance was placed on Pr. CIT v. Wipro Ltd 446 ITR 1 (SC) that Taxing statute must be read & complied literally & strictly particularly so where the assessee is seeking benefit of exemption or deduction provisions. The hearing was over & closed. During the course of hearing reference was made by the Bench to the decision of this Tribunal dt 30.09.2025 in the case of Sanjana Clothings (P.) Ltd. v. AID, CPC 215 ITD 256 (Indore–Trib)/ITA Nao:- 841/IND/2024 the copy of which was tendered on same day by Ld AR.

4.1 We have to decide the legality, validity and proprietary of the “Impugned Order” basis records of the case & the rival submission canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We basis records of the case and after hearing and further upon examining the rival contentions of the Ld AR and the Ld DR canvassed before us are of the considered opinion that orders of the lower authorities deserves to be Set Aside as the Assessee had filed the requisite Form No:- 10-IC [subrule (1) of rule 21AE] & had exercised the option under subsection (5) of Section 115BAA on 28.12.2023. In the said form at Para 6 an undertaking is taken that option u/s 115BAA(5) is to be exercised once & same cannot be withdrawn. We further hold basis subsection (5)of 115BAA that such option once exercised shall apply to subsequent Assessment Years. We note & observe that for the year under consideration AY 20242025 Form 10IC holds the field even though the same was filed on 28.12.2023. Para 1 of the Form No:-10IC is for subsequent years too [Paper Book Page 5]. We finally hold that Section 115BAA falls under chapter XII – Determination of Tax in certain cases & Section 115BAA w.e.f. 01.04.2020 gives Domestic Company an option to claim Tax@22% on the total Income subject to terms mentioned therein. One of the term is filling of form 10IC [Rule 21AE] by virtue of subsection (5) thereof which option is to be exercised only once & once exercised same shall apply to subsequent years too. There is No requirement to file the said form for each succeeding and or subsequent years.

4.4 In view of above Position of Section 115BAA(5) & Form 10IC [Rule 21AE] we have no hesitation to hold that in the Instant case Form No 10IC was filed by the Assessee on 28.12.2023 which fact is undisputed & that same holds the field for AY 2024-2025 too & accordingly the Impugned Order is Set Aside & Appeal of the Assessee is allowed. Any other Interpretation would render the same nugatory & otiose.

4.5 In the Premises drawn up by us as aforesaid we Set Aside the Impugned Order & allow the Appeal of the Assessee.

5.1 In the Result “Impugned Order” is set aside & Appeal of Assessee is allowed.

5.2 The appeal of the Assessee is allowed.

ORDER

Paresh M. Joshi, Judicial Member. – This is an Appeal filed by the Assessee for the Assessment Year 2012-13 under section 250 of the income tax Act 1961,[herein after referred to as the Act for the sake of brevity] before this tribunal as & by way of a second Appeal. The Assessee is aggrieved by the order bearing Number :-ITBA/ NFAC /S / 250 /2023-24/ 1058557647 (1) dated 07.12.2023 passed by the Ld. CIT(A) u/s 250 of the Act [National Faceless Appeal Centre (NFAC)], which is hereinafter referred as the “Impugned order”. The Relevant Assessment Year is 2012-13 and the corresponding Previous Period is from 01/04/2011 to 31/03/2012.

2. FACTUAL MATRIX

2.1 That as and by way of an Assessment Order made u/s 144 RWS 147 of the Act, the total Income of the Assessee was computed and Assessed at Rs 1,35,78,710/-. The total Income as per the Return of Income was NIL. That the aforesaid Assessment Order is dated 21/12/2019 of ITO Dhar MP which is hereinafter referred to as the “Impugned Assessment Order”.

2.2 The brief facts of the case are that the case of the Assessee was selected u/s 148 of Act for Scrutiny.

2.3 That as per the record available; the Assessee had sold land valued at Rs 60,63,500/- during FY 2011-12.

2.4 Notice(s) u/s 148,142(1) were served on the Assessee.

2.5 That it was stated by the Assessee that he along with his mother was the owner of the land situated at Baggad, District-Dhar which was about -1.783 Acre, The land was situated in a rural area. The Assessee is 46 years old and has done his elementary education. The land was Agriculture land and was Ancestral Property of Assessee’s late father and that the same was used for the agriculture purpose since many years. The said land was sold in the year 2011 by the Assessee along with his mother to M/s VE Commercial Vehicles Ltd which company established its manufacturing Unit on the said land. The Registered sale deed is dated 24/11/2011 in this regard. That before the sale, the Assessee and his mother had entered into a sale agreement with the buyer company. This sale Agreement was then followed by the registered sale deed. That after the sale Agreement the buyer company was requiring the land for the Industrial Purposes and hence the land was got diverted on 01/08/2011 by order of “Anuvibhagiya Adhikari” Dhar, MP and later by the District Collector Dhar, MP on 02/11/2011.

2.6 That the Assessee further contended that though the land has been mentioned as diverted land in the Regd Sale deed however it was used for agriculture purpose only. The diversion of the land was done at the instance of Buyer Company. The limited time gap between diversion and sale deed clearly indicated that diversion was only to facilitate the Registry of the land in the Name of buyer. There was change in the legal form which should not over ride the substance of the land specially when no further activity was done by the Assessee and his family members after the Diversion of land and that the land got sold immediately after the Diversion. The Assessee and his mother being illiterate person were not in a position to understand the impact and implications of the Diversion of land as for them the Diversion of land was a legal process for getting the land Registered in the Name of Buyer Company. Accordingly it was submitted that the transaction is for sale of the Agriculture land situated in the rural area which is not a capital asset and as such the transaction is not liable for tax under the provision of the Act.

2.7 That without Prejudice to the above, the Assessee also stated that the Assessee had also purchased another agriculture land on 16/01/2012, the payment of which was made from the sale proceeds of the above mentioned agriculture land. Accordingly the Assessee was also entitled for the exemption u/s 54B. [Total Purchase Price was Rs 27,16,970/-].

2.8 The Ld AO in the “Impugned Assessment order” identified the following points:-

2.9 That the Ld AO basis examination of documents i.e. Regd deed found that there was an Agreement for Sale of land in question and whether such an “Agreement for Sale” can be considered as ” transfer” in the light of Section 53A of the Transfer of Property Act. The Ld Assessing Officer then has reproduced 53A of Transfer of Property Act As below:-

“53A Part performance-Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues inpossession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 2[***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the or continued in possession, other than a right expressly provided transferee has taken by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.”

Basis Provisions of Section 53A of TP Act in other words the Ld AO remarked and observed that the Agreement of sale can be treated as Transfer when:-

2.10 The Ld AO remarked and observed that the possession of the property was not transferred by the Assessee which is evident from Registered deed itself where order of SDM and Collector are stated clearly. The Ld AO after analyzing the Provisions of MP land revenue code section 165 and 172 which deals with “Right of Transfer” and “Diversion of land” also concluded that Reading of both the section of MP land revenue code makes it clear that only “Bhuswami” Land owner can get the land diverted. Both the orders of SDM and Collector was passed after the “Agreement of Sale” dated 17/06/2011 which proves that at the time of Agreement of Sale dt 17/06/2011 the possession of the land was not transferred and the Assessee was “Bhuswami”. It was further held that Perusal of “Regd Deed” shows that the Final Payment of Rs. 1,36,55,250/- was made on 17/11/2011. Hence No Transfer till full payment was made. No copy of Agreement has been placed on record showing that the possession was transferred to Transferee Company (Buyer). Hence the Capital Asset transferred u/s 2(14) of the Act.

2.11 That the Assessee being Aggrieved by the aforesaid “Impugned Assessment Order” prefers the first appeal u/s 246A of the Act before the Ld CIT(A) who by the “Impugned Order” has dismissed the first Appeal of the Assessee on the grounds and the reasons stated therein. The core grounds for the dismissal of the first appeal were as under”:-

‘5. Decision:

5.1 It is pertinent that in order to decide this appeal in a timely manner notices/ communications through ITBA portal were sent to the appellant, viz. communications dated 29.01.2021, 30.04.2023 and 22.11.2023. The same has been successfully delivered

5.2 Finally on 29.11.2023 the appellant was issued following show cause notice:

“…Please refer to the above. In this regard, it is noted that you have been issued various notices from time to time, however, no response has been received from you till date. The details of such notices by this office are as under:-

2. In the case of CIT v. B.N. Bhattacharjee and another, reported in 118 ITR 461 [relevant pages 477 & 478] wherein their Lordships have held that:

“The appeal does not mean merely filing of the appeal but effectively pursuing it.”

3. In view of the above facts and legal position, you are hereby given the show cause as to why the appeal in your case be not decided on the basis of material available on record, due to continued non-compliance at your end till date. However, to meet the ends of natural justice, you are hereby given a final opportunity to make the submissions to substantiate the grounds of appeal taken by you in this appeal. If you have made any submission in this case so far (either physically or through online mode), these may be uploaded in the ITBA, as the online portal is showing that no submission had been made by you till date in this appeal. Your reply should be furnished on or before 05.12.2023 on ITBA, failing which it will be considered that you don’t want to pursue the appeal and the appeal would be decided based on the material available on record…,”

However, there evidently has appellant till date. been no response from the There is no gainsaying that once the appeal is filed by the appellant., it is obligatory on his part to pursue purposefully and co-operatively the same in a worthwhile manner, which the appellant has evidently failed to do. It clearly appears that the appellant’s compliance or rather lack of it, the appellant has not even bothered to pursue this appeal in any productive manner. Hence, in view of the aforesaid total on the part of the appellant, non-compliance/non prosecution of the instant appeal as under, ex-parte primarily on the instant appeal is adjudicated and disposed off, the basis documentation available on record.

5.3 I have perused the assessment order passed u/s 144 rws 147, Grounds of Appeal and SOF. The case of the appellant was reopened u/s 147. The AO after examination of the contention of the appellant observed that the appellant has sold capital asset within the meaning of section 2(14) of the Act and calculated long term capital gain at Rs.1,35,78,713/- which was added back to the total income of the appellant. The AO held that the appellant was a Bhuswami as per MP Land Revenue Code and also held that it fulfils definition of transfer under Transfer of Property Act.

5.4 During the course of appellate proceedings, sufficient opportunities were given to the appellant, however, no submissions/evidences/documents have been filed by the appellant to substantiate the grounds of appeal. The appellant was given specific opportunity to file any details filed by him before any authority physically/online earlier as no replies of the appellant are found existing in the online system. Thus, in the absence of any submission/documents, have no material to interfere with observations and addition made by the AO. In view of the above. 1 upheld the decision of the AO and confirm the addition of Rs.1,35,78,713/- Accordingly, all grounds of appeal are hereby dismissed

8. In the result, the appeal is dismissed. Order passed under section 250 read with section 251 of the Act.’

2.12 That the Assessee being Aggrieved by the “Impugned Order” has preferred the Instant second Appeal before this Tribunal and has raised following grounds of apeeal in the form No.- 36 against the “Impugned Order” which are as under:-

1. On the facts and in the circumstances of case and in law. Ld CIT (A) erred in not accepting assessee’s contention about the land sold by assessee being erroneously treated as capital asset in the assessment order, even though the said land was an agriculture land situated in rural area and accordingly was not a capital asset. It is prayed that land sold by the assessee be treated as agriculture land situated in rural area and accordingly capital gain calculated by the Ld. AO may please be deleted

2. On the facts and in the circumstances of case and in law and without prejudice to above ground of appeal, Ld. CIT (A) ought to have appreciated that the impugned assessment order is erroneous and suffers from non-application of mind since the capital gain has been calculated by taking sale value as Rs 1,36,55,250 whereas, in the order itself and notices issued to the assessee, his share of sale consideration had been stated to be 30,31,750 only.

3. On the facts and in the circumstances of case and in law and without prejudice to above grounds of appeal, Ld. CIT (A) erred in not accepting claim of assessee for exemption u/s. 54B of the act. It is prayed that the claim of the assessee u/s 54B be allowed.

3.1 The Hearing in the matter took place on 11/06/2026 before this Tribunal when the Ld AR for and on the behalf of the Assessee appeared before us and Interalia contended that the “Impugned Order” is bad in law, illegal and not proper. It is the violation of the Principles of Natural Justice. The Ld AR has placed on the record of this Tribunal a paperbook containing pages 1 to 66. A condonation of delay application is from pages 7 to 10. Affidavit in support is from pages 11 to 14. The Ld AR submitted that there is a delay of 575 days in filling the Instant Appeal. He relied upon contents of “COD” Application and Affidavit in support the relevant portion of which were read out by him. The Ld DR appearing for the Revenue stated that he leaves the Issue of the Condonation of delay to the wisdom of this Tribunal. After perusing the COD Application and Affidavit in support we are of the considered view that for the condonation of delay there is sufficient cause. Hence we condone the delay and admit the Appeal.

3.2 The Ld AR then readout the relevant portion of the Impugned Order and in the ultimate analysis submitted that the Impugned Order is not on merits. The LD DR also submitted that full and complete documents and the explanations were not furnished to the Ld Assessing Officer by the Assessee despite opportunities in this regard. Hearing was then over and concluded.

4.1 We have to decide the legality, validity and proprietary of the “Impugned order” basis records of the case & the rival submission canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We basis records of the case and after hearing and further upon examining the rival contentions of the Ld AR and the LD DR canvassed before us are of the considered opinion that the “Impugned Assessment Order” is under 144 of the Act and part reply is on record. Full and complete documents including the Agreement of sale, dated 17/06/2011 SDM order and Collectors’ order on Diversions are not placed on record. It is for the Assessee to place on the records of the Ld Assessing Officer who is the original Adjudicating Authority to place the Agreement of sale, Sale deed , Orders of SDM and Collector on Diversions etc along with all the material, evidences, supportings etc so that Ld AO can without any difficulties could do proper Adjudication and Adjudgement. The Opportunities to the Assessee should be utilized fully and half hearted information and the documents should not be given. In the instant case even before Ld CIT(A) the Assessee has remained Non Compliant and was not participative. We thus find Assessee to be a Non Complaint Assessee at both the levels. Ultimately Income of Assessee is required to be computed and Assessed basis all documents, material and evidences which has not happened. Even before us “Agreement of Sale” dt 17/06/2011 is not placed in paperbook nor any attention towards the same is invited basis the paperbook filed. Copy of SDM and Collector’s diversion orders are not filed in the paperbook. Under these facts and circumstanced we set aside the Impugned Order and remand the matter back to the file of Ld AO on denovo basis with a direction to the Assessee to place all the documents, material and evidence before the Ld Assessing Officer including the Agreement of Sale dated 17/06/2011 and all other deeds and documents pertaining to his claim. Since we have found the Assessee to be Non Compliant and not Co operative we impose a token cost of Rs. 2500/- on him. We hope and trust that imposition of such cost would have a deterrent effect on Assessee. We direct Assessee to update his email and that of his Authorized representative.

4.4 In view of the premises drawn by us, we set aside the “Impugned Order” and remand the case back to the file of Ld Assessing Officer on denovo basis who shall now pass a speaking and well reasoned order including on the alternative plea of the Assessee made before us and in respect of which all necessary material too should be placed on records on the file of “Ld AO like reinvestment of proceeds fresh deeds etc such pleas also to be considered in the totality of the circumstances.

5.1 In the result the “Impugned Order” is set aside and case is remanded back to the file of Ld Assessing Officer on denovo basis with directions as aforesaid. Cost of Rs. 2500/- to be paid in favour of PM Relief Fund. Proof in this regard to be examined by Ld Assessing Officer.

ORDER

Paresh M Joshi, Judicial Member. – This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961,[herein after referred to as the Act for the sake of brevity] before this tribunal as & by way of a second Appeal. The Assessee is aggrieved by the order bearingNumber:-ITBA/APLS/S/250/2024-25/1071722108(1) dated 31.12.2024 passed by the Ld. CIT(A) u/s 250 of the Act, which is herein after referred to as the “Impugned order”. The Relevant Assessment year is 2019-20 and the corresponding previous year period is from 01.04.2018 to 31.03.2019.

2. Factual Matrix

2.1 That as and by way of an intimation order made u/s 143(1) of the Act dated 17.02.2020 passed by the CPC Bengaluru a demand of Rs. 4,27,238/- was made. The total income was at Rs. 33,95,889/- [Rs. 16,97,787 from house property + Rs. 16,98,102/- profit & gain from business & profession]. Gross Tax liability was Rs. 10,59,518/- which was paid. However a fresh demand of Rs. 4,27,238/- was made. On page 44 of appeal memo an amount of Rs. 9,67,280/- was claimed as TDS, the amount Rs. 6,02,418/-was found matched & Rs. 3,64,862/- was found to be mismatched [Details of unmatched tax deducted at source] hence the demand of Rs. 4,27,238/- u/s 143(1). That the aforesaid intimation order u/s 143(1) bears No. :-CPC/1920/AS/1961789557 with demand identification no. 201920 1937107129042T and that the same is dated 17.02.2020 which is herein after referred to as the “Impugned intimation Order”.

2.2 That the assessee being aggrieved by the aforesaid “Impugned assessment Order” prefers the first appeal u/s 246A of the act before the Ld. CIT(A) who by the “Impugned Order” has dismissed the first appeal of the assessee on the grounds & reasons stated therein. The core grounds & reasons for the dismissal of the first appeal were as under:-

“6. Observations, Findings and Decisions

I have carefully considered the facts of the case and the submission of the appellant. I have perused the order dated 17.02.2020 passed u/s. 143(1) of the Income-tax Act by the C.P.C, Bengaluru for A.Y. 2019-20 as well as the grounds of appeal, statement of facts, and written submission filed by the appellant. From the intimation u/s 143(1) dated 17.02.2020 passed by CPC, Bangaluru it is observed that Assessing Officer has made adjustment u/s 143(1) and denying the TDS credit for Rs. 3,64,862/- deducted by from the income and raising a demand of Rs. 4,27,240/- vide order dated 17.02.2020 in the intimation u/s 143(1) of the Income Tax Act.

7.2 Ground no. 1,2 and 3 are related to disallowing TDS of Rs. 3,64,862/- and consequently raising demand of Rs. 4,27,240/-vide order dated 17.02.2020 in the intimation u/s 143(1). In this regard fact of the case and submission made. by the appellant it is perused that the credit of TDS shall be allowed in the assessment year in which the income from which tax is deducted, is assessable, has been concur. However, the assessment of income alone is not the criteria for claiming credit of TDS. The credit of TDS is admissible on fulfillment of other conditions prescribed in section 199 namely:

1. The tax deductible at source is actually deducted,

2. The Tax so deducted is paid to the Central Government and

3. A certificate of deduction of tax at source as provided under section 203 is furnished for claiming credit of TDS.

7.3 In this connection it is observed that the while processing income tax return u/s 143(1) and disallowing TDS credit of Rs. 3,64,862/-, it is pointed out by CPC shown in the 26AS/AIS of concerned assessment year and shown by the assessee in his file income tax return of AY 201 9-20. It is pertinent to note that the purpose of issuing TDS certificate under Section 203 of the Act is to enable the assessee to avail credit of the tax deducted at source in the relevant assessment year. If the TDS certificate is not issued, then under Section 199 of the Act, the assessee from Whose income, tax has been deducted at source will not be entitled to take credit of the said amount.

7.4 In view of the above it is observed that the appellant gives relevance of the section 205 of the act. In this regard it is stated that the fulfillment of the above conditions cumulatively that the credit of TDS would be allowable in a year in which the income is assessable. The provisions of section 205 of the Act lay down that once tax has been deducted at source, there would be no direct demand from the assessee from whose income tax has been deducted. Thus, the provisions of section 205 are in the context of recovery of demand and have nothing to do with the credit of TDS. For the purpose of claiming credit of TDS, the method of accounting followed by the assessee is also of no relevance. It is now well settled that the credit of TDS can be claimed in a year in which the income is assessable. Or in a later year if the income from which tax has been deducted has already been assessed in an earlier year.

7.5 In this regard, the provisions of Section 199 of the Act and Rule 37BA of the IT Rules governing the credit of Tax deducted at source are to be examined.

Credit for tax deducted.

199 . (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unitholder, or of the shareholder, as the case may be

(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.

Rule 37BA of the IT Rules:-

Credit for tax deducted at source for the purposes of section 199.

37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given on the basis of information relating to deduction of tax furnished by the deduc tor to the income-tax authority or the person authorised by such authority.

(2) ((i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee:

Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).)

(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.

(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in subrule (1) and shall keep the declaration in his safe custody.

(3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.

(ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.

1[(3A) Notwithstanding anything contained in sub-rule (1), subrule (2) or sub-rule

(3), for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previousyear in which such tax deduction is made.]

(4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of-

(1) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority, and

(1) the information in the return of income in respect of the claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.]

In view of the above, it is inferred that the information regarding the deduction of tax and deposit of such tax deducted by the deductor has to be given to the Central Government and in a certificate to be issued to the deductee. This can be evidenced by TDS certificate and Form 26AS. A perusal of the Form 26AS of the appellant shows that Rs. 6,93,587/- was deducted against a payment of Rs. 33,95,890/-. Since TDS of Rs. 6,93,587/- is evidenced by Form 26AS pertaining to the appellant, the grant of credit of TDS of Rs. 6,93,587/-against the TDS claimed in ITR of Rs. 10,58,449/ -by the CPC and disallowed the TDS of Rs. 3,64,862/-is correct and justified. Therefore, the demand raised by the CPC is upheld. The ground raised by the appellant is dismissed.

7.6 Ground no. 4 is related to charging of interest u/s234A, u/s 234B and u/s 234C of the Income Tax Act, 1961. The ground raised by the appellant is consequential in nature. Therefore, this ground is not adjudicated separately and hence dismissed.

8. In the final result, appeal filed by the appellant is disposed of as Dismissed.

2.3 That the assessee being aggrieved by the “Impugned Order” has preferred the instant second appeal before this Tribunal & has raised the following grounds of appeal in the form No. 36 against the “Impugned Order” which are as under:-

3.1 The hearing in the matter took place before this Tribunal on 27.04.2026 when the Ld. AR for & on the behalf of the assessee appeared before us & interalia contended that the Impugned Order” is bad in law, illegal & not proper. It therefore deserves to be set aside. It was pointed out to us that the registry has calculated the delay of 132 days in filling the instant second appeal. An affidavit of shri Abhishek Kumar Baheti partner of GT sales dated 23.04.2026 is placed on the records of this Tribunal in support of the condonation of delay. It is stated therein that the “Impugned Order” dated 31.12.2024 was passed in electronic mode & was not served manually or physically. The mail might have gone in to spam/junk folder and therefore firm remained unaware of the same. That in the month of June 2025 upon logging in to the income tax efiling portal it came to the notice that the “Impugned Order” was passed & immediately thereafter the instant appeal was filed albeit with a delay of 130 days. On 10.07.2025 the appeal was filed. It is avered in the aforesaid affidavit dated 23.04.2026 that the delay in filling the appeal was neither deliberate nor intentional, but occurred solely due to the lack of knowledge of passing of the “Impugned Order”. There was no negligence or malafide intent. In the interest of ends of justice appeal be admitted after condoning the delay. Per contra the Ld. DR appearing for & on the behalf of the revenue contended that department of income tax has no objection if the delay is condoned. Accordingly we condone the delay in filling the present appeal. The appeal is admitted & taken up for hearing.

3.2 The Ld. AR then contended that core issue in the instant appeal is that the required TDS credit is disallowed to the assessee by the orders of the lower authorities. Our attention was invited to PB page 147 (26AS) wherein the deductor “Mahadhan Agritech Limited” had deducted Rs. 9,67,280/- & that same was deposited. Our attention was also invited to PB page 132 form 16A of Mahadhan Agritech Limited deductor for assessee shree GT sales & subsequent pages up to Page 143. [Q1 to Q4] [01.04.2018 to 31.03.2019], as evidence of payment of the TDS amount. The Ld. AR has placed on the record of this Tribunal a “synopsis” of two pages & a page book page 45-168. Synopsis important points were readout during hearing. The Ld. DR appearing for & on the behalf of the revenue submitted that in the ultimate analysis the required TDS amount is paid & left the issue to be decided by the Bench. In the end of the hearing both the Ld. AR and the Ld. DR were at adidem that let the matter be remanded back to the file of Ld. AO for due verification of records of TDS paid.

4. Observations Findings & conclusions

4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case & the rival submission canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We basis records of the case & after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that the “Impugned Order” deserves to be set aside as the Ld. AR basis synopsis & paper book filed before us has demonstrated full payment of TDS by deductor (supra) in favour of duductee the assessee. Under these facts & the circumstances we deem fit to set aside the “Impugned Order” & remand the matter for the limited purpose of due verification of TDS amounts deducted by the deductor & paid to duductee for Tax credits claims. The due verification of form 16A, 26As etc. be done & then appropriate relief & benefit be granted to the assessee basis law.

4.4 In view of above, we set aside the “Impugned Order” & remand the case back to the file of Ld. AO for due verification as directed aforesaid.

5. Order

5.1 In the Result the “Impugned Order” is set aside as aforesaid with due verification to be done by Ld. AO.

5.2 . Appeal of the assessee is allowed for statistical purpose.

ORDER

Paresh M. Joshi, Judicial Member.- This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961,[herein after referred to as the Act for the sake of brevity] before this tribunal, as & by way of a second appeal .The Assessee is aggrieved by the order bearing No:-ITBA/NFAC/S/250/2024-25/1072319660(1) dated 20.01.2025 passed by the Ld. CIT(A) u/s 250 of the Act, which is hereinafter referred to as the “Impugned Order”. The Relevant Assessment year is 2017-18 and the corresponding previous year period is from 01.04.2016 to 31.03.2017

2.1 That as and by way of an “Original Assessment order” made u/s 143(3) of the Act, the total income of the Assessee was computed & assessed at Rs. 4,75,263/-. The total income as per the return of income was at Rs.4,38,550/-. An addition of Rs.7, 867/- was made as disallowance against “telephone expenses”. Yet another addition of Rs. 28,846/- was made as disallowance against the caption “other expenses”. The agriculture income was computed at Rs. 72,000/-. That the aforesaid “Assessment order” bears no:- ITBA/AST/S/143(3)/2019-20/1022601037(1) and that the same is dated 18.12.2019, which is herein after referred to as the “Original Impugned Assessment Order”. [First original Assessment Order]

2.2 During the year under consideration, the assessee was engaged in the business of retail trading of cloth under the name & style M/s. Navrang Vastralaya, Jawahr Marg. Nalkheda, Distt-Agar Malwa. The comparative chart with regard to gross sales and net profit for last three years is as under as per para 3 of the “original impugned assessment order”.-

2.3 The core reason for disallowance of the telephone expenses to the extent of Rs. 7, 867/- against the amount of Rs. 31,468/-claimed was that the complete vouchers were not available for the verification purpose. Accordingly the Ld. AO disallowed 25% of the expenses claimed and added Rs. 7, 867/- to the income of the assessee exigible to tax [Para 4 of the original Impugned Assessment Order][first round].

2.4 The core reason for disallowance under the caption of “other expenses” to the extent of Rs. 28,846/- against the amount of Rs. 1, 15,390/- claimed was that upon verification of this expenses on the test check basis it was noticed by the Ld. AO that some of the payments were not supported by the proper bills and were routed through internal vouchers and were not opened for complete verification. Relevant evidences for debit were absent. Some payments under head “other expenses” were supported by vouchers with only “thump impression” where identity was found to be unverifiable. Some bills/vouchers were found to be “self-made” under head “other expenses”. Accordingly the Ld. AO disallowed 25% of other expenses claimed and added Rs. 28,846/- to the income of the assessee exigible to tax [Para 5 of the original Impugned Assessment Order].

2.5 Further as and by way of an order made u/s 263 of the act the Original Impugned Assessment Order dated 18.12.2019 u/s 143(3) was revised by PCIT vide order bearing no.-ITBA/REV/F/REVS/2021-22/1040273089(1) dated 02.03.2022. Thereafter the Ld. AO passed a fresh Assessment Order bearing no. – ITBA/AST/S/144/2022-23/1051455091(1) dated 27.03.2023 u/s 144 RWS 263 of the act where by the total income exigible to tax was quantified and assessed at Rs. 10,78,950/. Income as per the ROI was at Rs. 4, 38,550/-. The addition of Rs. 10, 45,394/- was made as “estimated profit from business”. Addition of Rs. 33,557/- was made as and by way of disallowance the bifurcation of which were provided for at Para 6 of the “Impugned Assessment Order” [Second Round] dated 27.03.2023 [2^nd “Impugned Assessment Order u/s 144 rws 263”].

2.6 The core issue in the Impugned Assessment Order dated 27.03.2023 [Passed u/s 144 rws 263 of the act] was that there is a fall in the GP rate in the FY 2016-17 AY 2017-18. The assessee had submitted that this fall [from 17.71% to 12.62%] was due to factors such as change in the business strategy, the purchases of the goods form new parties who offered wide variety of the goods, instead of the traditional vendors apart from offering attractive prices which all lead to higher turnover and fall in GP. The assessee had submitted a chart which explained turnover vis-a-vis profits generated in the last three years which was as under:-

2.7 The assessee also contended that in order to achieve the high turnover the assessee sacrificed profits.

2.8 The explanation of the assessee was not found suitable for following reasons by the Ld. AO:-

Hence, the reasons for fall in G.P. are considered too general and vague and in absence of any documentary evidences in support of the claims raised as discussed above, the contention of the assessee is rejected for want of sustainable evidence and the Gross Profits for the year is estimated at 15% of the turnover of Rs.2,08,53,053/-, which works out to Rs.31,27,958/-. At this point, the books of accounts of the assessee are rejected u/s 145(3) of the IT Act, 1961, for having failed to justify the reason for fall in Gross Profit with cogent documentary evidences. The Gross Profit is estimated at 15% taking into consideration the fact that the assessee’s turnover has increased from 1.34Cr from earlier year to 2,08Cr in the current year. Accordingly, the Gross Profits from Business is worked out at Rs.31,27,958/-and the Net Profits from business is accordingly recomputed at Rs. 10,45,394/-.”

2.9 Accordingly basis above the Ld. AO from the business worked out the G.P. @ 15% of the turnover [estimated] and net profit from the business was recomputed at Rs. 10,45,394/-.

2.10 For aggregation of all the disallowances of Rs. 33,557/- the chart was drawn up by the Ld. AO in Para 6 with narrations [reasoning] at Para 3, 4, 5 of the Impugned Assessment Order dated 27.03.2023[second round].

2.11 That the assessee being aggrieved by the aforesaid Impugned Assessment Order dated 27.03.2023 passed u/s 144 rws 263 of the act prefers the first appeal u/s 246 A of the act before the Ld. CIT (A) who by the “Impugned Order” has dismissed the first appeal of the assessee on the grounds and reasons stated therein. The core grounds and reasons for the dismissal of the first appeal were as under:-

“4. During the course of appellate proceedings, the appellant has filed written submissions electronically and the same has been taken due cognizance off for the disposal of present appeal.

5. All the grounds raised by the appellant in the present appeal are against the against the aforesaid disallowances/additions made by the AO of 10,45,394/-(Business income) plus 33,557/- (various issues as already discussed above) and the same is adjudicated as under:

5.1 During the appellate proceedings the appellant contended exactly on the same tune as contended during the assessment proceedings. Nothing specifically was stated/furnished by the appellant in respect of the declaring the low profit percentage in the year under consideration. It was just stated by the appellant that due to increase in the business turnover the appellant has compromised the profit margin. The appellant further argued that the books of account of the appellant are audited and therefore the figures in the same should be adopted.

5.2 Now in order to adjudicate the matter all the facts of the case, findings of the AO during the assessment proceedings and the submission made by the appellant have been taken due cognizance off. Upon perusal of the facts of the case and the submissions made by the appellant, it is clear that the appellant has not provided any substantial or cogent reason during the assessment or appellate proceedings to justify the significant decline in the profit rate from 17.71% in the previous years to 12.62% in the current year. The AO during the course of assessment has thoroughly examined the appellant’s submissions and effectively countered each of the appellant’s claims with sound reasoning. Moreover, the AO, despite the lack of satisfactory explanations from the appellant, adopted a fair and reasonable approach by estimating the profit rate at 15% instead of 17.71%, thereby providing partial relief to the appellant. The AO is directed to estimate income as per above and compute total income of the appellant

5.3 In respect of the other issues the appellant merely contended that the additions made by the AO were ad-hoc and requested their deletion, without substantiating this claim with any credible evidence or arguments. The AO, however, had determined the additions based on relevant material facts, circumstances, and logical reasoning, and there is no basis to classify these additions as ad-hoc or arbitrary. Considering the facts of the case and the detailed reasoning provided by the AO, the additions made and the profit rate adopted by the AO appear to be justified and in accordance with law. Therefore, the additions made by the AO of 10,45,394/-(Business income) plus 33,557/-(various issues) are hereby upheld and the grounds raised by the appellant in this regard stands dismissed.

6. In the result the appeal is Partly Allowed.”

2.12 That the assessee being aggrieved by the “Impugned Order” has preferred the instant second appeal before this tribunal and has raised the following grounds of appeal in the form no. 36 against the “impugned Order” which are as under:-

“1.On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the order passed by the Assessing Officer u/s 144 r.w.s. 263 of the Income Tax Act, 1961.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO of estimating the profit of the appellant at Rs. 10,45,394/-.

3. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in upholding the action of the Assessing Officer of rejecting the books of accounts of the appellant.

4. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in upholding the action of the Assessing Officer of making addition of Rs. 33,557/- on account of disallowance of expenses.

5. The appellant craves leave to add any new ground of appeal or alter, amend or delete any of the above grounds of appeal.”

3.1 The hearing in the matter took place before this Tribunal on 21.05.2026 when the Ld. AR for & on behalf of the Assessee appeared before this tribunal & interalia contended that the “Impugned Order” is bad in law, illegal & not Proper. It therefore deserves to be set aside. The Ld. AR has placed on the record of this tribunal a paper book containing pages 1 to 61. An additional paper book which is case law compilation from pages 1 to 80. The Ld. AR submitted that assessee is in the business of retail textile trade. A brief history of the case as narrated by us as above was repeated and reiterated. In so far as proceedings u/s 263 of the act was concerned it was submitted that no appeal was filed before this tribunal against the section 263 order dated 02.03.2022 of PCIT Indore-1. It was submitted that the book of accounts were rejected by the Ld. AO u/s 145(3) of the act by passing the Impugned Assessment Order dated 27.03.2023 [second round] u/s 144 rws 263 of the act. The core dispute is addition of Rs. 10, 45,394/- as GP of 12.62% for the year under consideration year was not accepted as earlier year GP was at 17.71% [FY 2015-16]. The Ld. AO estimated GP @ 15% of turnover of Rs. 2, 08, 53,053/- and added Rs. 10, 45,394/- to the income of the assessee. The Ld. AR attributed the higher sales volumes during the year under consideration with the earlier year [FY 2015-16] and the preceding year [FY 2014-15] and relied upon table reproduced at Para 2.6 above. The order u/s 263 was read out. It was submitted that in the original Assessment Order dated 18.12.2019 [first round] limited additions were made as we have narrated above. Our attention was drawn to PB page 19 to 21 i.e. notice u/s 142(2) of the act dated 04.01.2023. Page 21 where the information/ documents were sought which was read out. Our attention was invited to PB page 29 which was a reply of assessee dated 11.01.2023 to 142(1) notice dated 04.01.2023. Basis reply dated 11.01.2023 it was submitted that the sales from FY 2016-17 Assessment Year 2017-18 the year under consideration, the sales of the assessee had drastically increased. The reason for such an increase in the sales trends was due to change in the business strategy. It was submitted in brief that the reasons are given in reply dated 11.01.2023 PB page 29. The increase in sales was drastic in terms of % jump when compared with the earlier year & the preceding year. It was submitted that the lower authorities have wrongly rejected books of accounts. The limbs of section of 145(3) are not satisfied. No cogent reasons have been given by the lower authorities to reject the ‘books of accounts’ within the meaning of section 145(3) of the act. There is no express finding in the orders of the lower authorities that books of accounts are incomplete in nature and that its contents are incorrect. The Ld. AO himself has ranged GP between 10 to 15% and that assessee is in range of 15% as determined by the Ld. AO himself. It was emphasised that in the show cause notice there was nothing about rejection of books of accounts of the assessee but in the Impugned Assessment Order dated 27.03.2023 [second round by virtue of section 263 order] books of accounts are rejected hence the Impugned Assessment Order is beyond the scope of the show cause notice. Further the lower GP % as compared with earlier year & the preceding year has not been held to be a reason to reject the books of account. Reliance was placed on case law compilation page 1 where there is a reported decision of this tribunal in case of ACIT v. Anant Commodities Ltd. 214 ITD 68 (Indore – Trib.) wherein it is held that mere decline in gross profit margin in the relevant year compared to preceding assessment years cannot by itself be a ground to make addition to the assessee income unless assessing officer identifies specific defects or discrepancies in books of accounts maintained by the assessee. Our attention was drawn to Para 2.2 & 4.4 of the said order of ITAT Indore. Our attention was next drawn to PB (case law compilation) page 7 to the Judgement of Hon’ble Delhi High Court in case of CIT v. Smt. Poonam Rani 326 ITR 223 (Delhi) wherein it was held that low rate of gross profit, in the absence of any material pointing towards falsehood of account books cannot by itself be a ground to reject accounts books under section 145(3) of the act. Reliance was placed on Para 6, 7 & 8 of the Delhi High Court Judgement. The Ld. AR basis above two precedents submitted that only “eyebrow” can be raised. Books of accounts in the instant case are audited done. No defective account, (it’s entries) are found. No falsehood is established. It was submitted that the GP is net figure. The opening stock, the closing stock, the purchases and the sales are not doubted at all. The components of GP are not wrong. The GP is a mathematical result of certain components but nothing is doubted by the Ld. AO submitted the Ld. AR. Reliance was placed on Amarjothi Granites (India) (P.) Ltd v. Asstt. CIT 58 SOT 130 (Jodhpur – Trib.) wherein it was held that section 145 by itself does not deal with addition or deletion in income and thus, merely because there is some deficiency in books of account or merely because there is rejection of books of accounts, it does not mean that it must necessarily lead to addition in the returned income of the assessee. Reliance was also placed on in case of Century Tiles Ltd. v. JCIT [2015] 152 ITD 327 (Ahmedabad – Trib.) wherein it was held that where the assessee maintained the regular book of account which were duly audited, decline in the gross profit and disproportionate increase in the expenses in certain heads by itself, would not empower the revenue to reject book results, said reason can, at best present a case where the assessing officer ought to have verified the books with caution and make due inquiries. Reliance was placed on ACIT v. Budhalal & Co.  (Ahmedabad Tribunal) and unreported decision in Mukesh Kumar Chandulal v. ACIT [ITA No.-529(Ahd) of 2025, dated 4-9-2025]and in particular Para 6.2 of said order wherein following was recorded:-

“6.2 It is trite law that low profit, by itself, cannot be a ground to reject the books of account or to make an addition, unless specific defects are pointed out in the maintenance of accounts, stock valuation, or method of accounting. The Assessing Officer in the present case has not recorded any finding of inflated purchases, suppressed sales, or defects in stock records. The rejection of book results was made only on the basis of a fall in the GP ratio. This approach is not sustainable in law.

The Hon’ble Gujarat High Court in CIT v. Symphony Comfort System Ltd.   (Guj.)] has held that the Assessing Officer was not justified in rejecting the book results and enhancing the gross profit rate merely because the GP ratio had fallen compared to the preceding year, when no specific defects were pointed out in the books of account. The Hon’ble High Court categorically observed that in absence of any defect pointed out in the books of account and the records maintained, the AO was not justified in rejecting the books results, so as to enhance the gross profit rate. The ratio of the said judgment, being that of the jurisdictional High Court, is binding on us and squarely covers the issue in favour of the assessee.”

3.2 Per contra the Ld. DR appearing for and on behalf of the revenue submitted that books of accounts were not produced before the fresh proceedings PB pages 41 & 30 were compared. The Ld. DR submitted that the festival timeline are not getting correlated. In reply dated 11.03.2023 to the show cause notice dated 06.03.2023 page 36 to 37 [page 36 to 44] there is no mention of any festivals. No details are given with regard to stand of the Ld. AR that new vendors were found and that new prices emerged, no details are given in the proceedings. Books of accounts not given despite order u/s 263 of PCIT. Discrepancies were not addressed by the assessee. Basis Para 2.4 of the Impugned Assessment Order dated 27.03.2023 [section 144 rws 263 2^nd innings] books of accounts were not produced contended the Ld. DR. The assessee had produced the books in the original assessment proceedings (first round). The Ld. DR then placed reliance on Para 5.2 of the Impugned Order and stated that the Ld. AR has not brought on record nor has contended that said observation of the Ld. CIT (A) in Para 5.2 is devoid of any merits. The Ld. DR supported Para 5.2 of the Impugned Order and stated that by estimating 15% instead of 17.71% GP partial relief already stands given to the assessee.

3.3 In the rejoinder arguments the Ld. AR submitted that issue of scrutiny in the first round was complete scrutiny of large case deposit during demonetization and abnormal increase in sales with decrease in profitability compared to previous years and Para 2 of section 263 order dated 02.03.2022 was read out by the Ld. AR. The Ld. AR further submitted that there was no proper inquiry by the Ld. AO to reject the books of accounts in the second round and that books of accounts were not called in 142(1) notice.

3.4 The Ld. AR then submitted that on Para 6 page 5 of the Impugned Assessment Order (second round) where there is disallowance of Rs. 10,780/- u/s 40(a)(ia) in respect of payment of interest to Shri Akshay Kumar Bam of Rs. 35,932/- the form 15G was not provided and that no grievance is made on this score. With regard to excess payment of interest on loan to Smt. Suman Phaphariya of Rs. 52,118/- is concerned it was an unsecured loan and interest payable was @ 15%. The Ld. AO has not seen the commercial expediency angle. The Ld. AO observation in Para 4 of the “Impugned Assessment Order”[second round] are general in nature. The inter se transactions of unsecured loan have not been held to be bogus. No allegation of specific nature is on record. Disallowance of Rs. 10,424/- being difference between 15% rate and 12% rate is wrongly decided and added to income [Rs. 52,118 @ 15% & Rs. 41,694 @12%]. With regard to the disallowance of Rs. 10,853/- on account of addition to building is wrong and so also of Rs. 1500/- on account of addition of furniture. Reliance was placed on section 40A (3) and 43(1) second proviso. It was finally submitted that except Rs. 10,780/- [40 (a) (ia)] the remaining disallowance should be deleted. The Ld. DR submitted that appropriate call with regard to the remaining 3 item be taken by bench as they deem fit. Hearing was over and concluded.

4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case & the rival submission canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We basis records of the case & after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that addition of Rs. 10,45,394/- basis estimation of gross profit for the year under consideration is wrong and not proper. The Ld. CIT (A) ought to have allowed the first appeal of the assessee. The Ld. CIT (A) has repeated and reiterated the finding of the Ld. AO in the Impugned Assessment Order dated 27.03.2023 [2^nd round section 144 rws 263]. The Ld. AR basis material on record has established that a slightly lower GP rate from the earlier year or the preceding years ip so facto is not sufficient ground perse to reject the GP rate of 12.62% for the year under consideration, just because for FY 2015-16 the GP rate was at 17.71%. Further mere rejection of books of accounts u/s 145(3) for the failure to justify the reason for fall in GP with cogent documentary evidences is no ground to reject the books of accounts [Para 2.4 (d) of the Ld. AO Impugned Assessment Order]. Under section 145(3) which deals with method of accounting is reproduced below:-

“145. [Method of accounting. [Substituted by Act 22 of 1995, Section 31, for Section 145 (w.e.f. 1.4.1997).]

(1)Income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2)The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3)Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.] [Inserted by Act 20 of 2002, Section 60 (w.e.f. 1.4.2003).]”

A plain bare simple perusal of above section 145 speaks of satisfaction of the Ld. Assessing Officer on the books of accounts. It states that satisfaction should be on correctness or completeness of the account of the assessee which is the first limb and second limb is on method of accounting provided in sub section (1) of section 145 i.e. cash or mercantile system which has not been followed by the assessee or income has not been computed in accordance with standards notified under sub section (2) of section 145. None of these material ingredients were put to the notice of the assessee. The Ld. AR has made a grievance of it and we concur with his submission that due process with regard to section 145 have not been strictly adhered to by lower authority. The assessee has placed on the record of this tribunal ITR, COI, TAR, audited balance sheet and P/L A/c basis PB pages 1 to 17 with a certificate that these documents were available with the Ld. Assessing Officer and the Ld. CIT (A). We find that with these documents being on the file of lower authorities no specific allegation much less a finding is recorded that material ingredients of section 145 are not followed stricto senso. Under these facts and circumstances we hold that rejection of book u/s 145(3) is not proper and correct. The Lower authorities have erred in law. The assessee had provided all the information, material in the scrutiny assessment and to establish contrary perse was initially on the department by making specific imputations but that has not happened in the instant case. The assessee has given a reasonable and plausible explanation both before lower authorities and before us and we do not see any imperfections in the same. The sales turnover in “Retail Textile Trade” is subject to market (fluid) conditions. Due to exigency of the market conditions the assessee took a commercial decision for the year under consideration that he would do a larger volume of business with the lower profit margin looking to present and future market too. In this regard the Ld. AO cannot question the wisdom of assessee business decisions and compare his turnovers and gross profit ratio with that of the earlier year or the preceding years in the absence of any cogent material in his possession. In the instant case the lower authorities have done so by making a comparison/ comparative analysis and have in fact estimated GP at 15% instead of 12.62% which is an exercise in the realm of the hypothesis.

4.4 We find that the Ld. AR has rightly relied upon precedents of High Court and that of coordinate benches of ITAT which we have analysed above and we concur with those decisions and orders. We respectfully follow Judgement of Hon’ble Delhi High Court in case of Smt. Poonam Rani(supra) wherein Hon’ble Delhi High Court has correctly held that :-

“6. On a perusal of the assessment order, we find that the Assessing Officer has not pointed out any particular defect or discrepancy in the account book maintained by the assessee. During the course of hearing before the Commissioner of Income Tax (appeals), it was pointed out by the assessee that the account books of the assessee were duly audited under Section 44 AB of the Excise Act and the quantitative details as required by Clause 28 (b) of Form No.3CD regarding raw material and finished products (i.e. opening stock of raw material, raw material issued to production department, raw material consumed and closing stock of raw material, opening stock of finished goods, finished goods produced during the year, finished goods sold and closing stock of finished goods) were prepared and audited by certified accountant and were enclosed with Form 3CD which had been placed on record but, the Assessing Officer had ignored the factual figures, both in qualitative and quantitative terms, enclosed with the return and filed during the course of assessment proceedings. It was for this reason that CIT (Appeals) was satisfied that the assessee had furnished complete details, including quantitative details in respect of purchase of raw material, manufacture of copper wire and sale of the furnished products. In these circumstances, we fail to appreciate how the accounts, maintained by the assessee, could have been said to be incomplete or inaccurate. In fact, the Assessing Officer had no material before him to treat the accounts of the assessee as defective or incomplete.”

“10.Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him, to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of gross profit, in the absence of any material pointing towards falsehood of the accounts books, cannot by itself be a ground to reject the account books under Section 145(3) of the Act.”

4.5 We respectfully follow our own decision case of ACIT v/s Anant Commodities (Indore Tribunal) wherein the ratio culled down is “mere decline in gross profit margin in relevant year compared to preceding assessment years cannot by itself justify addition to assessee’s income unless Assessing Officer identifies specific defects or discrepancies in books of account maintained by assessee.”

4.6 We simultaneously hold that on business and financial scores nothing is disputed by the revenue basis any documents/ material/evidences. No cogent reasons are given by the lower authority save & except an estimation of GP @15% of turnover.

4.7 We gainfully refer to the decision of Hon’ble ITAT in case titled Mukesh Kumar Chandulal (supra) wherein in the Para 6.2 following is held

“6.2 It is trite law that low profit, by itself, cannot be a ground to reject the books of account or to make an addition, unless specific defects are pointed out in the maintenance of accounts, stock valuation, or method of accounting. The Assessing Officer in the present case has not recorded any finding of inflated purchases, suppressed sales, or defects in stock records. The rejection of book results was made only on the basis of a fall in the GP ratio. This approach is not sustainable in law. The Hon’ble Gujarat High Court in CIT v. Symphony Comfort System Ltd.  (Guj.)] has held that the Assessing Officer was not justified in rejecting the book results and enhancing the gross profit rate merely because the GP ratio had fallen compared to the preceding year, when no specific defects were pointed out in the books of account. The Hon’ble High Court categorically observed that in absence of any defect pointed out in the books of account and the records maintained, the AO was not justified in rejecting the books results, so as to enhance the gross profit rate. The ratio of the said judgment, being that of the jurisdictional High Court, is binding on us and squarely covers the issue in favour of the assessee.”

4.8 We observe that the Ld. Assessing Officer has himself observed that gross profit ratio is between 10% to 15% being industry standard [Para 2.4.1 page 27 of PAPER BOOK]. The Ld. AR has rightly stated that the GP of 12.62% squarely falls under this standard and to take maximum rate of 15% is prejudicial to the assessee. We concur with the view of the Ld. AR on this score too.

4.9 In so far as other disallowance of the assessee are concerned which are tabulated in Para 6 of the Impugned Assessment Order aggregating of Rs. 33,557/-the Ld. AR has fairly conceded that the disallowance of Rs. 10,780 for non-submission of 15G is justifiable u/s 40 (a)(ia) against the interest paid to Shri Akshay Kumar Bam of Rs. 35,932/-. In so far as other three disallowances are concerned with regard to disallowance of Rs. 10,424/- being the differential interest between Rs. 52,1118/- @ 15% paid and Rs. 41,694/-@12% which is allowed by the Ld. Assessing Officer. We are of the considered view that on what basis and at what rate the unsecured loan is to be taken is the prerogative of the assessee. In any event interest rate of 15% paid by assessee to the unsecured creditor is not an exorbitant and excessive. It is reasonable we delete this addition. In so far as disallowance of Rs. 10,853/- on the fixed assets [Addition to fixed assets i.e. the buildings] and Rs. 1500/- on furniture the assessee too is entitled to the reliefs and the additions are deleted, as “furniture” and addition to fixed assets i.e. the building are part of “assets” for purpose of business & shown as such in the balance sheet [5.1 of “impugned assessment order” dated 27.03.2023 [second round]. The reasoning applied is wrong by the lower authorities as the assessee basis PB pages 48 to 52 has demonstrated addition to the building and the furniture. The Ld. AR alternatively has contended that if the issue of “Depreciation” is not considered then whole of the amount expended on the “building” and “furniture” should be allowed as “Revenue expenditure” incurred solely for business which would further reduce income exigible to tax.

4.10 In view of premises laid down by us appeal of the assessee is partly allowed. Addition of Rs. 10,45,394/- is deleted. Addition of Rs. 10,780/- is sustained. Remaining additions of Rs. 10,424/- , Rs.10,853/- and Rs.1500/- are all deleted.

5.1. In result, appeal of the assessee is partly allowed.